Mortgage rates could be set to increase in 2017

Diane King

There are signs that mortgage prices are rising this year after months of record low rates for homeowners.

The latest product data analysis, from mortgage software company Mortgage Brain, reveals that the most recent three months of market data has shown rises to the cost of the majority of mainstream mortgage products.

As of January 1, 2017, the data shows that the cost of a two-year Tracker with a 90 per cent loan to value has gone up by eight per cent over the past three months.

A 90 per cent loan to value, two-year fixed mortgage now costs five per cent more than it did in October 2016.

In monetary terms, the eight per cent increase for the 90 per cent two-year Tracker equates to an annual increase of £576 on a £150,000 mortgage, and a £342 annual increase for the 90 per cent two-year fixed product.

“It’s perhaps still a little too early to predict that mortgage rates are rising and that this trend will continue,” Mark says. “However, our latest analysis is starting to show signs that we may finally be moving away from the long period of record lows in terms of mortgage rates and costs to a period of stability, or potentially, rises.”

There is still some good news for borrowers, however, with Mortgage Brain’s latest data showing that the cost of the lowest rate five year Tracker (60 per cent loan to value) is now 18 per cent lower than it was three months ago.

With a current rate of 1.79 per cent, the reduction in cost for this product equates to a potential annual saving of £1,674.

Mark continues, “While our long term analysis still shows that borrowers can benefit from a number of savings, with healthy cost reductions and low rates still available, there has been a clear shift over the past three months with cost rises across the majority of products analysed.”

Long-term analysis

Mortgage Brain’s longer-term analysis also shows strong year on year reductions spanning the past four years. The cost of a 90 per cent loan to value two-year tracker, for example, is now 19 per cent lower than it was in January 2013. A 90 per cent loan to value two and five-year fixed mortgage are both 17 per cent cheaper, and a 60 per cent two-year tracker and two-year fixed are both 16 per cent lower than they were four years ago.